A serious lack of consumer confidence...

Where do I start this week!?  So much negative news surrounding the world of financial services.  As I write this column, the Breaking News is that Bob Diamond has resigned as Chief Executive of Barclays, following his Chairmans departure some hours earlier.   Both following Libor (London Inter Bank Offered Rate) and Euribor, the interest rates at which banks lend to each other, fixing and interest rate swap miss-selling scandals.  Also, in relation to last week’s fine of £290m by the FSA and US authorities after it admitted that their traders manipulated Libor.  This now leaves a rather large ship with no captains to steer them.  No doubt the board will act quickly and more light will have been shed on the matter by the time this is printed.  However, the bottom line is that, allegedly, a number of other banks are also under investigation and thus, this could be just the first of many, and in addition, it‘s a further act of mistrust and will bring an increased lack of confidence to an already fragile market.

This comes in the wake of the technical issues at Natwest/RBS, which affected many customers across the country.  Despite the bank confirming all issues had been sorted last week, the bank still has issues and some customers, allegedly, were hit with incorrect duplicate payments on their mortgages this week.   Does make you wonder how we ever functioned without technology and, more worryingly, how totally dependent we have become on it…

And finally…the Bank of England’s latest figures suggest that gross lending secured on dwellings hit £12.2bn in May up from £11.6bn in April.  Repayments also rose from £11.4bn in April to £11.7bn in May.   House purchases fell to 51,098 in May from the 51,627 figure recorded in April and remortgage approvals also dipped from 30,799 in April to 29,244 in May.  All signs of a reduced availability of mortgage credit and with the Eurozone crisis still in the mix, and a serious dent in consumer confidence, we might not see these figures change dramatically any time soon.

Mortgage approvals down, but product choice increased

The official line from the Bank of England is that mortgage approvals declined for the sixth month in a row. A reduction of` 0.4% in October compared to September. However, despite these headlines, nearly 100,000 people were approved for a mortgage and total lending amounted to over £11bn! We still appear to be trying to relate to 2007 figures (£30bn+ per month) and it is unlikely that we will be at that level again for some years yet. We really should be thankful that financial institutions are lending at all!

In comparison, as predicted in an earlier column, mortgage products are rapidly on the increase as we move towards the year end. Moneyfacts report that the number of mortgage products now available to borrowers has grown significantly, with mortgages at 80% LTV, or more, seeing the biggest improvements. At the same time rates continue to fall, with the average two, three and five-year fixed rates all standing at the lowest level seen since records began. At AToM HQ, we’ve seen an increased number of consumers switching from current deals to secure a low long term fixed rate. Some are even opting for a short term low rate tracker. Many lenders are offering free valuations and free legals on remortgages, so the cost of change can be minimal. Some lenders have even re-launched exclusive products via certain mortgage distributors in order to attract new business before the year end. These products tend not to be available on the high street, and a review with an independent mortgage advisor could be time well spent.

Finally, no one really knows what is going to happen to house prices month on month in the current climate, but two separate sources have predicted what they think 2011 will bring. Hometrack, an online automated property valuations company, suggest that house prices will drop by 2% whilst a fall of 3.1% is predicted by the Office of Budget Responsibility, an independent assessment body. Although these are only predictions, and are subject to change, the underlying message appears to be consistent for next year…

Volumes have been increasing but the World Cup may slow it down..

Signs that the market is still not fully on the road to recovery have been reaffirmed this week as both Northern Rock and NatWest Intermediary Solutions reported that circa 600 jobs are to go. The cut backs are further proof that although positive signs have been outweighing the negatives recently, we cannot overlook the underlying financial instability issues endemic within the financial industry. And, of course, we all wait with baited breath to see what impact the forthcoming emergency budget will bring. The coalition government have been left with a huge debt/financial crisis to pick the bones out of and it appears to be much worse than we all imagined. No doubt we will get to know the full picture on the 22nd June.

In the meantime, we have been receiving a higher volume of mortgage applications for purchase transactions from across the country. The removal of HIPS does appear to have had some impact. Those looking to sell seem to be more active and yet there are some great deals to be had for purchasers whilst house prices remain relatively low in some areas.

However, with this in mind, market activity is predicted to lull during the World Cup and just as the market is showing signs of momentum. This is something we could do with out in the current climate. Obviously, I hope England win the tournament, but it would be nice if the housing market rides on the wave of success too! That said, pundits are predicting an increase in activity of up to 8% after the World Cup has finished.

Finally, as market activity has been buoyant over the last few weeks, so has the underhand tactics of some of the corporate Estate Agency chains in the area. We hear first hand from customers who have been ‘told’ to use to the internal Mortgage Adviser (who may not offer whole of market products) or their mortgage offer will not be put forward to the vendors. This is a clear breach of the Code of Practice for Residential Estate Agents. To review all the Rules and Code of Practice, visit www.naea.co.uk . They are an interesting read and certainly something you should review before entering the house buying process so you know your rights.